New Orleans City Council has created a new fund dedicated to chipping away at more than $40 million in judgments owed to parties who have successfully sued the city going back more than 20 years.

Council members voted Thursday (Sept. 14) to keep a minimum annual balance of $2 million in the new Judgment Fund for paying settlements and state court orders. The money would be in addition to the $10 million the city borrowed this year to put toward those debts.

State law doesn't effectively compel local governments to meet court-ordered obligations because a loophole in the Louisiana Constitution prevents their assets from being seized. That allows cities and other entities to put off payments indefinitely, although the problem is most acute in New Orleans.

"I think this is a step in the right direction from this council to not kick a can down the road just because the law allows us to," said Councilman at-large Jason Williams, who championed the creation of the fund. "I think we've seen the results of kicking a can down the road at the Sewerage & Water Board and in other areas."

The money to keep the fund balance at the $2 million minimum would come from court judgments or settlements as well of portions of insurance settlements in the city's favor, according to the ordinance approved Thursday. It goes into effect on Jan. 1, 2019.

Williams has said previously that the city received $1.7 million every year between 2011 and 2016 from lawsuits, and it lost about $2.9 million annually on average between 2006 and 2016.

The ordinance puts oversight authority over the fund in the hands of the city finance department, which will report to the chief administrative office and City Council and provide an overview of payouts in the annual city audit.

Council members have been exploring a strategy to pay less than the full amount on some settlements to get money more quickly to more people, council aides said in late August. The city still owes some plaintiffs from judgments reached in 1996, and Councilwoman Susan Guidry noted the city may no longer be able to reach some of the people owed money.

The Landrieu administration has also moved to borrow $20 million to pay settlements reached last year with the families of victims whose civil rights were violated by the New Orleans Police Department. That includes $13.3 million for victims of the Danziger Bridge shootings after Hurricane Katrina.